Why service dominant logic is the next shift for consumer brands

Why service dominant logic is the next shift for consumer brands

May 2024

by the Consumer team at 42T

Leading consumer brands will inevitably embrace SDL and adopt a new approach to development. Product development companies like 42T offer a strategic advantage by adopting a holistic approach rooted in service dominant logic.

There is a shift underway in the evolving landscape of consumer brands. Traditional product-centric models are giving way to a new era of service orientation. This transformation is driven by the principles of service dominant logic and represents a fundamental reimagining of how value is created, delivered, and perceived by consumers.

Understanding this transformation and the landscape of service-oriented strategies in consumer brands is crucial for businesses that want to remain competitive. From proposition design to ecosystem development, we’ve unpacked the key concepts reshaping the way brands engage with their audience and deliver value.

Rethinking strategies

Consumer brands are undergoing a profound transformation by adjusting their focus from traditional product-centric models to service-oriented approaches. This strategic shift reflects a fundamental recognition: success in the modern business landscape does not hinge merely on the products themselves but on the value proposition and experience offered to customers.

As consumer preferences continue to evolve and competition intensifies, brands are rethinking their strategies and adapting to changing market dynamics. This is leading to a growing emphasis on service orientation as a strategic imperative for sustainable growth and differentiation.

Consumer brands are no longer content with merely offering products, they are working to deliver comprehensive solutions that address their customers' changing needs and desires. This shift towards a service orientation is driven by a desire to foster deeper connections with consumers, enhance brand loyalty, and stay ahead of the competition.

Service dominant logic

In this service-oriented market era, the traditional approach to product development no longer suffices. 

Brands have to develop products differently. At a fundamental level, product value creation becomes a cooperation between service owner and customer taking the overall experience they provide to consumers into account. This involves a more holistic approach to product design that considers the broader context in which products are consumed and the value they contribute to customers' lives.

Unlocking the principles of Service Dominant Logic

Understanding the principles of service dominant logic (SDL) is essential to succeeding in today’s dynamic consumer brands landscape. A fundamental reimagining of value creation and exchange lies at the heart of SDL.

Unlike traditional goods dominant logic (GDL), which views value as inherent in products themselves, SDL asserts that value emerges through interactions between service providers and customers. This shift in perspective places the emphasis on the co-creative nature of value, where the focus is on facilitating mutually beneficial exchanges.

Service dominant logic

The philosophy of SDL embodies several key principles that underscore its relevance to consumer brands. These include the primacy of service, the centrality of value co-creation, and the importance of relationships and networks in value exchange. Ultimately, it is all about cultivating deeper connections with customers, fostering loyalty, and differentiating themselves in a crowded marketplace.

The rapid technological advancements and evolving consumer preferences that define today’s market landscape mean adopting SDL is no longer a choice but a strategic imperative for consumer brands. By shifting their focus from transactional exchanges to relational interactions, brands can build trust, enhance brand reputation, and create sustainable competitive advantages.

Designing service-centric propositions

Service-orientated proposition design is the strategic process of crafting offerings that resonate deeply with customers' needs, preferences, and aspirations. It goes beyond the mere transactional exchange of goods or services and focuses instead on creating holistic solutions that address the broader challenges and opportunities faced by consumers.

At its core, proposition design revolves around the concept of value creation. Differentiation is key in a service-oriented market landscape,  and brands must prioritise designing offerings that deliver tangible value to customers. This calls for a deep understanding of customer needs and market dynamics and a commitment to innovation and continuous improvement.

Service dominant logic

Successful proposition design is characterised by its ability to create meaningful connections with customers, fostering loyalty and advocacy. By aligning offerings with customer expectations and delivering superior value, brands can carve out a distinct identity in the marketplace and position themselves as trusted partners in the eyes of consumers.

Example:  As a sign of what this looks like in the market, consider the case of Scotland-based BrewDog who have emerged as creators of unique atmosphere and experience around their craft beers. BrewDog don’t just sell drinks, their bars are designed to look urban, modern and appealing to young professionals. They offer membership services and even beer school tasting experiences. This emphasis on the overall experience has contributed to BrewDog’s success in building a loyal customer base and maintaining their competitive edge in the industry.

Harnessing adjacent value for brand success

Understanding and capitalising on adjacent value opportunities is essential for consumer brands that aim to differentiate themselves and drive growth. Adjacent value refers to the additional value that can be created by extending a brand's offerings beyond its core products or services. It involves identifying complementary or related areas where the brand can expand its presence and enhance its value proposition to customers. In a service-oriented context, adjacent value plays a crucial role in broadening the scope of offerings and deepening customer engagement.

Identifying and capitalising on adjacent value opportunities requires a strategic approach that aligns with the brand's core strengths and customer needs. It’s all about exploration to uncover opportunity areas informed by experiential data, and ultimately the best place to do this is with your existing customer base in the market.

Service dominant logic

Partnerships and collaborations can provide valuable opportunities for brands to tap into adjacent value. By teaming up with other businesses or organisations that offer complementary products or services, brands can enhance their value proposition and reach new customer segments.

Many consumer brands have successfully leveraged adjacent value to drive growth and enhance their competitive position in the market. 

Example:  Royal Philips is on a strategic journey to not only narrow focus on the health continuum, but to build interconnected offerings from the customer's perspective. In their case, it involves stepping across the regulatory line bringing provider-driven care and consumer healthcare together. This has involved a focus on data sharing and route-to-market / business model innovation. It will be very interesting to see how this journey plays out.

Building an ecosystem for sustainable growth

While adjacent value focuses on identifying specific opportunities to expand a brand's value proposition beyond its core offerings, building an ecosystem involves creating an interconnected network of products, services, and stakeholders that collectively create value for customers. It involves fostering symbiotic relationships between various elements of the ecosystem to enhance the overall customer experience and drive business success, which becomes a huge competitive advantage.

Service dominant logic

Building an ecosystem around products and services offers consumer brands a host of benefits. One key advantage is enhanced customer engagement and loyalty. By offering a seamless and integrated experience across multiple touchpoints, brands can deepen their relationships with customers and increase retention rates.

An ecosystem approach also allows brands to unlock new revenue streams and business opportunities. By leveraging partnerships and collaborations within the ecosystem, brands can expand their offerings and reach new customer segments, driving revenue growth and diversification.

Example:  The Sonos system of seamlessly interconnected speakers is designed to work harmoniously together. An ecosystem can be a complementary set of offerings across sectors, coming together to create a uniquely valuable offering.

Innovating with new format products

Innovation in product development is crucial for service-oriented brands looking to stay competitive and meet customers' evolving needs. New format products represent a paradigm shift in traditional product development by offering innovative solutions that address emerging consumer trends and market demands. These products often involve novel designs, functionalities, or delivery methods that enhance the customer experience and offer distinct advantages over existing offerings.

Example:  The Cambridge-based Raspberry Pi Foundation, with their single board computer, has revolutionised DIY electronics, education and prototyping, enabling people to build anything from robots to home automation systems. Their products are designed with affordability in mind while their low cost makes them accessible to a wide range of users from hobbyists to educators and professionals, with unmatched versatility.

Leveraging system engineering for integrated solutions

System engineering is an interdisciplinary approach to designing and managing complex systems throughout their lifecycle. It involves integrating various components, processes, and stakeholders to achieve a cohesive and optimised solution that meets specified requirements. It is particularly relevant in service-oriented businesses, where it ensures alignment with customer needs and business objectives by streamlining processes and enhancing efficiency.

Implementing system engineering principles in product development requires a systematic approach that encompasses several key strategies. This includes establishing clear requirements and objectives, conducting thorough analysis and modelling, collaborating among cross-functional teams, and prioritising iterative and incremental development to adapt to changing requirements and market conditions.

Real-world examples abound of consumer brands leveraging system engineering principles to deliver integrated solutions that offer superior value and performance. 

Example:  Ocado, a pioneer in online grocery retail, has worked at system level and harnessed cutting edge technology to increase efficiency and reduce the need for human intervention in their warehouses. Powered by AI, robotics and automation, the Ocado Smart Platform enables efficient online grocery service fulfilment. In 2022, the company unravelled a series of innovations including the world’s lightest and most efficient grocery fulfilment bot, robotic arms that pick groceries directly from storage grids, and an optimised site design, all of which serve to reduce time, resource and running costs.

Adopting service dominant logic

Adopting SDL provides several strategic advantages for consumer brands. By emphasising value co-creation and customisation, brands can create meaningful connections with customers and position themselves as trusted partners rather than mere product providers. This customer-centric approach leads to increased customer lifetime value and sustained business growth.

SDL also helps brands meet strategic goals by aligning business objectives with customer needs and preferences. By focusing on delivering superior value and service experiences, brands can enhance brand reputation, drive customer satisfaction, and achieve sustainable competitive advantage.

Service dominant logic

Adopting SDL can also help brands overcome price fights and commoditisation by shifting the conversation away from price towards value, building a loyal community. 

Given these strategic advantages, leading consumer brands will inevitably embrace SDL and adopt a new approach to development. Product development companies, like 42T, offer a strategic advantage by adopting a holistic approach rooted in service-dominant logic. 

At 42T, we are a dynamic collective of forward-thinking deep innovators. Through our expertise in linking first principles to innovation, and our ability to guide companies through the transition from conventional to innovative business models, we can empower companies to embrace SDL and drive innovation.

Contact our team today to learn more about how we can support your journey towards service-oriented success. Read Consumer case studies here.

If you would like to find out more, please contact 42T's Head of Consumer, Robin Ferraby:

Robin Ferraby

robin.ferraby@42T.com | +44 (0)1480 302700 | Robin Ferraby | LinkedIn

Robin leads 42T's work in the consumer sector, developing and managing our client relationships in the fast-moving consumer goods and appliance sectors.

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